I have an IRS agent from the bklyn NY office who is doing two audits with me. One is a pizzeria and the other business is a bigger company with 50 ees.

The audits are for the 2009 years.

The auditor asked to see the 2008 5500 for the pizzeria. The 5500 showed that they lost 30% on the money. She said that she is now going to open the 2008 year for the audit because she wants to make sure that the HCEs did not take any money from the plan and use it for their personal use.

I asked her if she even remembered 08 and that it was the worst financial downturn since the 30's. I told her that people lost more than 30%. She said that she just want to check.

The bigger company uses Ascensus. I printed out the 09 annual statement which does not have the Ascensus logo on it. Thus she is also going to open up 08 as she also stated that she wants to make sure this is not another Bernie Madoff situation. On the bigger plan she is also doing trust accounting to make sure that all contributions are timely deposited and nothing was stolen.

Times are bad and the IRS is trying to catch those HCEs who might be taking money from the 401k. In order to do so it appears that everyone is guilty until proven innocent!!!!!!!!!!!!!!!

Employer makes a 20% contribution to himself in Jan 2011 for 2010. Then discovers the EE contribution is more than he can afford.

Can he withdraw part of the contribution from the SEP (note it is not an excess contribution) to a level he can afford for the employees?

He does not want to apply some to 2011 as he is adopting a PS/401k Plan.

(I guess he could lie to the IRA company and tell them it is an excess contribution and get it back, not sure even about that. Trying to be honest as a first option.)

Thanks for any ideas or information.

A five year employee was stopped for speeding. The police determined that the name and SSN belonged to a man in the penitentiary. The employee turned out to be an undocumented immigrant who was using the convict's name and SSN. Employee is being held in custody. The Feds are prosecuting many of these persons now for illegal entry before deporting them. I doubt if there will be any way this person can apply for a SSN (I think one has to apply in person at a Social Security Office) or a TIN. When the employer originally checked the name and SSN, they turned up as valid.

I have advised the employer that the 1099 for the 401(k) distribution should have the employee's CORRECT name and that it should leave the SSN/TIN block blank if the employee does not have one. It should attach an explanation when it files the 1099 with the government and then send the explanation again when the Service sends a proposed penalty letter for an incomplete 1099. Withholding would be at the normal rate.

Does anyone have any different ideas.

it's Friday and it's been a while since I 'ruined' someone's day.

I posted these a few years ago - time to do it again.

Identify the 100 college football helmets. 50 on one spreadsheet, 50 on another

An employee's covered child has turned 18, moved out, and isn't taking his meds, so she wants to drop his coverage (why pay for it, if he won't use it?) Prior to PPACA, I don't think this would be an issue since he would no longer be a dependent, but now with the expanded rules for dependents, I am thinking she cannot drop his coverage until open enrollment because despite it all, he remains eligible. Am I missing something?

We have a non-profit organization (Employer A), sponsor of a 401(k) plan and 403(b) plan. The entity acquired a non-profit organization (Employer B) in 2007. Employer B had a 403(b) plan, but contributions ceased to the plan as of the takeover date, and former employees of Employer B then became eligible to participate in Employer A's plans. Is there any reason why Employer B's 403(b) plan cannot be terminated?

Hi-I am working on a plan that is in the process of setting up franchises. My question: are franchises considered Affiliated Service Groups for coverage purposes? If yes, is there every a time that they would not be? They are trying to determine the impact of the NDT testing. Can they exclude those employees from the plan?

Audited plan has brokerage accounts for some of its employees (the rest are at a daily val platform). I assume there is some level of revenue sharing going on between the funds and brokerages. What are other people doing about this?

Are there a law or regulation in regards to when an employee's pretax HSA deduction should be deposited into their account? This is employee contribution only, no employer contribution. A friend of mine is paid weekly but their HSA hasn't been deposited in over a month.

Thank you!

Company is a one member LLC who receives a K-1 each year. It is a Beginning of Year Valuation. For 2011, he deductibl contribution is lmited to 2011 Schedule K-1 less 1/2 SE tax, correct? So let's say the Minimum Required Contribution is calculated at 1/1/2011 to be $100,000. But the 2011 Schedule K-1 ends up being $50,000. The full $100k has to be contributed to meet the minimum funding requirements. What impact does this have on the contribution amount and/or deduction, penalty for nondeductible contributions, etc?

One of our clients, a bank, attended a seminar put on by the ABA (American Bankers Association).

According to one of the speakers at the seminar, if a Mortgage Loan Originator (MLO) receives any salary/comp based on any bank profit, they would not be able to participate in the bank's retirement plan.

Has anyone heard of this?

We are auditing a 401k plan. Plan document says Match is 100% up on first 5% for the month, and 50% up to 7% for the month. Notwithstanding preceeding sentence, a participant shall not be entitled to Match with respect to a month unless he is an Eligible Employee on the last day of the month. Just to clarify this not discretionary.

For 2010, Match was calculated on annual basis. This benefits some participants and others were shorted. And some participants received match even though they were not eligible on the last day of the month. We advised client and TPA of error and recommended they revise calculation to comply with plan doc. They said "eh, we don't think it's big deal".

So obviously, failure to comply with written terms of the plan document. This is an operational defect, right? And they are risking disqualification?

For 2011, Match is being calculated on per payroll basis. argh!

I posted this question elsewhere but received no response. Looking for some opinions:

There seem to be no instructions for Schedule A Part III. I'm guessing this is to be filled out on a cash basis but was looking for other thoughts. Specifically premiums for a prior year that get paid after the policy year is over - I'm assuming these should be included with the current year's premiums.

If a company pays a non-404(k) dividend to an ESOP (so it is NOT deductible under IRC 404(k)), is it automatically a nondeductible contribution for 404(a) purposes?

Or is the non-404(k) dividend still a deductible contribution to the extent it does not exceed the limits under IRC 404(a)(3)?

Hello everyone! I have a question that I hope someone might be able to assist with.

We have a recently re-hired employee at our firm. Through no fault of our plan advisor (Schwab), he was not auto-enrolled in the 401(k) plan, which he should have been enrolled in since his re-hire date in June of 2010 through the present. Schwab recently sent him auto-enroll forms, and the employee will be auto enrolled by the next few paychecks.

What steps should we take to fix this issue, specifically vis a vis the IRS? Is this something that requires correction under EPCRS Rev. Proc. 2008-50, or is it a simpler fix?

Any assistance with this matter would be greatly appreciated. Thanks so much!

say a plan uses a 12/31 val date.

so for 2011 the val date is 12/31/2011.

the 2011 pbgc premium filing is due 4/30/2012

it is often difficult (if not imposible) to obtain data in advance of the deadline to do the val.

anyone experience this? any suggestions? thanks

An election for Healthcare FSA for the 2011 plan year was made. In January, that amount was met and employee received total amount elected, but funding is spread over whole year.

Employee will have a change in status (birth) and wanted to change election to cover the amounts of additional Healthcare expenses between January and the birth. This is a considerable change. Employee will receive 3-4 pay checks after the birth before going on unpaid leave which could mean the Employee doesn't return to work until 2012 (new plan year).

Employer has advised that Employee can change election of the Healthcare FSA, the increase will have to be limited to amount that Employee could pay to the plan during those 3-4 paychecks before going on unpaid leave (that is currently an unknown calculation). Employee expected to increase election by the amounts of Healthcare expenses that have already incurred (e.g. would be eligible for reimbursement today if higher election made in beginning) or those that will incur while still receiving some pay (e.g. deductible to be paid for baby to the hospital).

Please tell me your thoughts. I have done a lot of research on this and have come to no clear answer. I do know that Employer Plan suspends the FSA when there isn't sufficient pay to meet the contribution/deduction and only vaguely mentions making arrangements to pay contributions while on leave (presumably post-tax).

We would like to amend our defined benefit pension plan to encourage older employees to stay. One idea is to increase the annual accruals upon the attainment of a specified age/service. For example, benefits would accrue at 1% annually, but will accrue 1.25% after age 55 + 30 years service.

Is this allowed?

Is it permissable for a 412(e)3 plan to use one insurance company to provide benefits under a frozen formula (effective 12/31/09) and to have another insurance company provide benefits provided under a new formula (effective 1/1/10)?

We sponsor the Corbel Volume Submitter 401(k), PS and MP documents. With the PPA restatement coming up I was wondering if we should go ahead and drop the Money Purchase Plan? We only have a few MPP’s left on the books and those are all 0% of pay plans we set up for clients years ago (typically retiring doctors) who wanted to maintain the plan for various reasons but were no longer going to make any contributions to it. Can we switch these clients under the 0% MPP over to a PSP document or will we run into an issue with the PSP not having substantial and recurring contributions? Do other practitioners still use the 0% of pay MPP?

Thank you for any feedback.